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Finding the Money

Finding the money to start a business is a common problem for many entrepreneurs. But it need not be. Many different resources are available to fund your dream, such as:

Use your savings

It is not uncommon for entrepreneurs to have to put their dreams on hold for a while until they have saved enough to get started. Even if you plan on getting an outside investor, he or she will still likely want to see that you have your own money on the line too. You can always cash out your life insurance; whole life policies have a cash value that you can either cash out or borrow against. You can also sell your stocks and bonds.

Tap your retirement

You may have a 401(k) plan or an IRA. Either way, these funds are possible sources of start–up capital. Before you decide to take this step, make sure it is legal. Each state has different laws regarding how funds are tapped.

Use your credit cards

It is common for people to get start–up funds from their credit cards. Although entrepreneurs do this all the time, be cautious. Interest rates of 18% can foster unmanageable debt very quickly. Here then is some advice on how to use cards wisely:

  • After you have run up your cards, transfer all balances to your card with the lowest interest rate. This can save you a lot of money every month.


  • Apply for a new card with a really low introductory "teaser" rate (e.g. 4.9%), and transfer all of your balances onto that card.


  • Pay off the total balance as soon as possible, but in any case, do not pay only the minimum.

Borrow from someone else

Other people's money has been a source for new businesses for as long as there have been businesses. The first place to look is with friends and family. Maybe your dad would be willing to give you a loan against a future inheritance, or you might have a good friend who believes in you.

Use the SBA

The sad reality is that banks don't always loan money to new businesses. Because of this, look for a bank that works with the Small Business Administration (SBA). The SBA guarantees a variety of loans, allowing these banks to fund small businesses that cannot otherwise qualify for loans. As such, the SBA is one of the best friends your new business can have.

Find a co-signer

You can always ask another person to co–sign on a loan to augment your credit. But remember that a co–signer is also liable for the note. If you fail to pay it, the bank will go after your co–signer.

Find an angel

Angel investors are as the name implies — people who have extra money and are willing to take a risk on a new venture. To find one, speak with your banker, lawyer, stockbroker or accountant, or go online to www.garage.com or www.sourcecapitalnet.com.

Use home equity

Banks are more than happy to lend you money against the equity in your house. Beware though, as a new business is a risky venture. If it doesn't work — and you are unable to repay the loan — not only will you lose your business, but you could also lose your home. Because of this, home loans should be an option of last resort.

Get another partner

Finally, maybe you can find another partner who would be willing to pony–up the money to get started in exchange for your labor.


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